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Sallie Mae Servicing LP v. Lee

United States District Court, D. Arizona

February 16, 2016

Sallie Mae Servicing LP, Plaintiff,
v.
Christine M. Lee, et al., Defendants.

ORDER

James A. Teilborg Senior United States District Judge

Pending before the Court are three motions filed by the United States of America (“United States”): Motion for Entry of Garnishment Disposition Order (Doc. 18), Motion to Seal Attachment to Motion to Amend Case Caption (Doc. 22), and Amended Motion to Amend Caption (Doc. 23). Defendants have not responded to any of the motions, and the time to do so has passed. The Court now rules on the motions.

I. Procedural Background

On March 27, 2001, Sallie Mae Servicing LP (“Sallie Mae”), as agent for Student Loan Marketing Association (“SLMA”), obtained a judgment (“Judgment”) against Defendant Christine M. Lee (“Lee”) in the Superior Court for the State of Arizona, Maricopa County. (Doc. 1 at 1). The Judgment, entered in favor of SLMA, was in the principal sum of $128, 001.87, in addition to $20, 349.98 in interest, $575.00 in attorneys’ fees, and $238.00 in costs. (Id. at 1-2).

On May 1, 2002, for consideration of $148, 351.85, SLMA assigned the Judgment to the United States. (Id. at 4). Subsequently, the United States requested the Clerk of Court for the U.S. District Court of Arizona to register the Judgment, and on April 22, 2004, the Clerk of Court did so. (Id.)

On April 16, 2010, the United States filed an application for Writ of Garnishment with the U.S. District Court of Arizona, listing CT Corporation System as the garnishee. (Doc. 2). On April 20, 2010, the Clerk of Court issued the Writ. (Doc. 3). The United States gave notice of the garnishment to Lee, who signed for the service by certified mail on June 9, 2010. (Doc. 7 at 2). Lee did not request a hearing on the garnishment and has never appeared in this case. On August 16, 2010, the Court ordered the garnishee-under the name of High-Tech Institute, Inc.-to pay 25% of Lee’s non-exempt earnings to the United States. (Doc. 9). High-Tech Institute, Inc. did so until May 2, 2014. (Doc. 23 at 2).

On April 30, 2015, the United States filed a Motion to Amend Caption to include the United States “as Plaintiff to conform the case caption to the previous garnishment and to a garnishment being filed that same day.” (Id.) The United States “inadvertently” failed to serve this motion upon Lee but did so after the Court questioned whether service was necessary. (Id. at 2-3).

On August 5, 2015, the United States moved for an entry of a garnishment disposition order listing The University of Phoenix, Inc. as the garnishee. (Doc. 18).

II. Amended Motion to Amend Caption (Doc. 23)

In this motion, the Court must determine whether, after a lender obtains a state court judgment against a borrower for defaulting on a federally-insured loan and assigns its interest in the judgment to the United States pursuant to 42 U.S.C. § 292f(b) and the United States “registers” the judgment in federal court pursuant to 42 U.S.C. § 292f(h)(3), the registering court[1] can amend the case caption to include the United States as plaintiff.

The United States argues that the Court should amend this matter’s caption to include the United States as plaintiff because it is the “real party in interest.” (Id.) On September 10, 2015, the Court requested supplemental briefing on what authority permits the Court to amend the caption of the registered state court judgment. (Doc. 19). The United States responded that § 292f(h)(3) conveys such authority. (Doc. 23). This statute provides:

With respect to any State court judgment that is obtained by a lender or holder against a borrower for default on a loan insured under this subpart and that is subrogated to the United States under subsection (b) of this section, any United States attorney may register such judgment with the Federal courts for enforcement.

§ 292f(h)(3). Also relevant is subsection (b) of section f which states:

Upon payment by the Secretary of the amount of the loss pursuant to subsection (a) of this section, the United States shall be subrogated for all of the rights of the holder of the obligation upon the insured loan and shall be entitled to an assignment of the note or ...

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